The practice of legally reducing tax burden by utilizing systems and deductions permitted by law. It is clearly distinguished from tax evasion (illegal tax avoidance). Furusato Nouzei, iDeCo, NISA, and various income deductions are representative tax-saving methods, and by correctly understanding and applying these systems, it is possible to reduce annual tax burden by tens of thousands to hundreds of thousands of yen.
Key Tax-Saving Methods Available to Salaried Employees
Tax-saving options for salaried employees may seem limited, but combining multiple systems can yield significant results. The most accessible is Furusato Nouzei, which provides return gifts and tax deductions for an effective cost of just 2,000 yen. The next most impactful is iDeCo, where contributions are fully deductible from income. A person earning 5 million yen who contributes 23,000 yen monthly saves approximately 83,000 yen annually in taxes.
Commonly overlooked tax-saving methods include medical expense deduction and the self-medication tax system. If annual medical expenses exceed 100,000 yen, the medical expense deduction applies; if over-the-counter drug purchases exceed 12,000 yen, the self-medication tax system applies. Transportation costs for hospital visits also qualify for medical expense deduction, so keeping receipts and records is important. Life insurance premium deductions and earthquake insurance premium deductions are applied simply by declaring them during year-end adjustment, so be sure not to forget submitting the certificates.
Understanding the Boundary Between Tax Saving and Tax Evasion
Tax saving is the act of optimizing tax burden within the bounds of the law and is completely legal. Tax evasion, on the other hand, is the illegal act of avoiding taxes through income concealment or false declarations, and if discovered, is subject to heavy additional taxes (35-40%) and criminal penalties. Between the two lies the gray zone of "tax avoidance," where reducing tax burden in ways contrary to the spirit of the law risks being denied by the tax authorities.
The practical point to watch is whether tax-saving actions are accompanied by "economic rationality." For example, purchasing unnecessary insurance solely for tax savings is counterproductive if the premiums exceed the deduction amount. iDeCo also carries liquidity risk since funds cannot be withdrawn until age 60, so contribution amounts should be determined after securing emergency living funds. Tax saving is a means, not an end. The key is balancing maximization of after-tax take-home pay while maintaining quality of life.
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